>what currency is your bet in?
I'd buy gold and keep my Swiss Francs. :-)

Buying gold may not be a bad idea.

But apparently for most people you have to buy stocks in gold mining companies or funds which invest in them.

Not easy to store Krugerrand much less bullion.

Buying gold has traditionally been the worst investment of all time.

"Buying gold has traditionally been the worst investment of all time."

Are you talking gold jewellry or coins, say, or stocks in gold mines/mutuals? (I'm guessing the former).

I wouldn't see it as an investment, but as a safe haven for some time. Most folks I know are buying stocks in gold mines right now but I wouldn't bet on one horse only but diversify.

"Are you talking gold jewellry or coins, say, or stocks in gold mines/mutuals? (I'm guessing the former)."

I think he is speaking of buying gold itself. During the 70's, the price of Gold (and other precious metals) rose steadily and it gained a reputation as a good hedge against inflation. This hasn't been true for probably 20 years, which makes sense as inflation has been relatively low during that time.

Now stocks in mining operations are another question entirely. I wouldn't invest in a strict Gold mining company, but mining companies in general have been riding a wave of surging commodities prices (copper and other non-precious metals, especially). This surge in demand is largely being driven by Asia's rapid industrialization. It is this same surge in commodity prices that has driven the Canadian and Australian currencies to such heights.

During the Major government the UK tried to back sterling by buying pounds.
This was after they had tried to peg the pound at (in the ERM) at a rate the city thought too high, causing interest rates to soar.
The result - champagne time in the city as they simply sold and sold to the gov at this silly rate.
Eventually they had to stop, the pound fell and the gov was left with a huge debt.
You can't buck the market.

It is interesting to note that in September 1939, a British pound was worth $4.20 US.

"It is this same surge in commodity prices that has driven the Canadian and Australian currencies to such heights."
I am not sure of the Australian dollar, but the Canadian dollar has really only surged in comparison to the US dollar... or if you like, the Canadian dollar looks strong compared to the US dollar.
Check out a historical comparison of the loonie to the euro or pound or yen.

Gold is not an investment that provides a positive return; it is simply an investment that holds its value.

If the Chinese and others decide to stop buying U.S. debt, the U.S. will be in very serious trouble.

Nations can indeed go bankrupt, and it has historically happened many times.

Of course countries can go bankrupt, why couldn't they. Cities can go bankrupt, also. Just to name an obvious example, the Weimar Republic was bankrupt after WWII. Argentina was bankrupt in 2002.

Isn't Pakistan bankrupt? I think it also was about the time of Argentina.

No, Pakistan is not in default. Yes, Argentina defaulted on its foreign-currency debt but they're no longer in default.

It is quite interesting to note that several US states--Florida, Mississippi, Louisiana, Indiana, Michigan, Maryland and Pennsylvania--defaulted in early 1840s.

>The only thing that's going to keep foreign investors interested in the dollar is higher interest rates. <

If you owe the bank $100,000, the bank owns you.

If you owe the bank $100,000,000,000, you own the bank.

The Chinese, Japanese, Europeans and even the Arabs have no interest in seeing the US economy collapse.

((I))

It's better to get something back, than nothing at all, but if the choice is "us" or "them"? I wouldn't bet on other countries to see their $$ assets vanish without at least trying to cash in.

Hi L,

It isn't a choice of "us or them".

If the US goes into a major recession, the rest of the world goes into a major depression.

It is in their interest to prop us up.

((I))

If I had a trillon $ losing value every day, I wouldn't just stand and wait when I see others cashing in. I would want to get as much in return as possible. And in the end there still are other economies on the planet where I could sell my stuff. (And I wouldn't "only" get $$ in return.) China surely isn't afraid of recession. So I'm not sure if depression is a consideration at all?

"If I had a trillon $ losing value every day, I wouldn't just stand and wait when I see others cashing in. I would want to get as much in return as possible."

Ever heard of buy and hold? The world is not made up of day traders. I'm sure there are a fair number of really smart people - folks who do this for a living, rather than just prattling on at Fodors.com - that tend to look at this as a buying opportunity.

Buy some more and catch the falling knife :D. We'll love you for it!